Malaysia Airline swings to a loss in Q3

[flee 5]

Nov 25 (Reuters) - Malaysian Airline Systems Bhd (MASM.KL): * Malaysia airlines (MASM.KL) Q3 net loss at 299.6 million rgt versus 38.1 million ringgit profit in the same period last year * says the outlook for the fourth quarter 2009 continues to be challenging although there is an early sign of improvement in passengerand cargo traffic, partly stimulated by marketing campaigns. yields remain under pressure.

 

Source: http://www.reuters.com/article/industrialsSector/idUSWNAS777220091125

[Sing Yew 1]

Been pretty busy lately so this will be a quick snapshot on the key financials:

 

Profit and Loss in RM'000 for Q3

 

Operating Revenue 2,893,860

Operating Expense -3,034,276

Other Operating Income 67,112

To arrive at a Loss from Operations of -73,304.

 

Derivative Losses -202,059 (ouch)

Finance Cost -19,998

Share of results from assoc companies -1,704

 

Balance Sheet item worthy of mention:

Cash as at 31 Dec 2008 was RM 3,571,743,000

Cash as at 30 Sep 2009 was RM 1,725,435,000

Reduced by half.

 

Sales in advance of carriage increased a little:

As at 31 Dec 2008 was RM 1,222,410,000

As at 30 Sep 2009 was RM 1,442,911,000

 

Contribution by segment towards Operating Revenue in RM'000:

Airline: 2,631,680

Cargo: 450,594

Catering: 3,287

Others: 20,793

 

Contributing to an operating profit/(loss):

Airline: (35,737)

Cargo: (36,930)

Catering: 1,085

Others: 112

 

Looks like Cargo is bleeding quite a bit this quarter. Contributing more than half of the ops loss.

 

Let's see how did they fare in the fuel hedging game:

(Loss)/Gain from fuel hedging contracts (RM174.5mil)

(Loss)/Gain from foreign currency hedging contracts (RM16.8mil)

(Loss)/Gain from interest rate hedging contracts (RM10.8mil)

 

Total derivative loss for the Quarter (RM202.1mil)

 

For the period ended 30 Sep 2009 (i.e. since 1 Jan 2009):

Gain from Fuel Hedging Contracts: RM563.4mil

Gain from FX Hedging Contracts: RM8.0mil

Gain from Interest Rate Hedging Contracts RM10.0mil

 

Total Derivative Gain of RM581.4mil

 

From Note 11 of their Notes to the Financial Statements:

 

Note 11: Financial Instruments

 

As a result of early adoption of FRS 139: Financial Instruments, Recognition and Measurement, fuel hedging contracts,

interest rate hedging and foreign currency hedging contracts which were previously classified as off balance sheet financial

instruments have now been recognised in the balance sheet as derivative financial instruments.

 

a ) As at 18 November 2009, the Group has entered into various fuel hedging contracts for periods up to 31 December 2011 in

lots totalling 18,393,984 barrels. The fuel hedging programme is closely monitored and is subject to the vagaries of the market such as geopolitical events, the economic situation and weather conditions.

 

b ) As at 18 November 2009 the Group has entered into various interest rate hedging contract transactions for periods up to

13 December 2016 for a total notional amount of RM2,180.3 million. The fixed interest rates relating to interest rate hedging contracts as at 18 November 2009 vary from 2.15% to 5.00% per annum.

 

c ) As at 18 November 2009, the Group has entered into foreign currency hedging contracts and options for a total notional

amount of RM1,075.0 million for periods up to 21 October 2010.

Edited November 25, 2009 by Sing Yew

[KK Lee 5]

Operation loss of RM73,304 million is a great improvement if compared with Q2. MH is likely to achieve operation profit in Q4.

 

Loss at Mas Kargo is largely due to price transfer from the airline.

 

[flee 5]

Interesting info from Business Times:

 

MAS is looking to lease two additional B737-800s to increase its domestic and regional capacities next year. It will take delivery of its first jet next October and is currently looking for financing

 

It looks like they have also hedged a lot of the fuel requirements:

 

MAS has hedged 57 per cent of its fuel requirement at US$90 per barrel (RM304) for the rest of the year and 60 per cent at US$100 per barrel (RM338) for 2010

 

Source: http://www.btimes.com.my/Current_News/BTIMES/articles/jmas25/Article/index_html

[KK Lee 5]

It looks like they have also hedged a lot of the fuel requirements:

 

Conventionally, prudent hedging is up to one year ahead. It seemed MH was either pessimistic on oil price or intend to make huge profit from hedging.

 

[Azreen 0]

Cash position not too bad,if yield starts to improve too, then they are not in a too bad footing!!

[Sanjay Thaker 0]

KK, just curious.. what do you mean by 'Price Transfer from the airline' which contributed to the losses of MasKargo?

[KK Lee 5]

KK, just curious.. what do you mean by 'Price Transfer from the airline' which contributed to the losses of MasKargo?

 

MH is known to charge Mas Kargo ‘full fare’ for the use of underbelly, air tickets, etc.

 

[Sanjay Thaker 0]

Thanks, KK.